Why Famous Short Sellers Changed Their Minds About Tesla

I don’t know if you noticed, but Tesla $TSLA shares went crazy yesterday. Why?

Do you remember the guys who were suing Tesla a few weeks ago because of Elon’s tweets about taking Tesla private? They’re called Citron Research, and whenever they release a report, things tend to get spicy. In May they wrote about Roku $ROKU which caused shares to soar up to 9%. Yesterday, Citron Research released a similar report where they were saying that Tesla “is light-years ahead of the competition”, that there’s “NO Tesla killer”, and that the Model 3 (pictured above) “is a proven hit”. Quite a turnaround.

Sometimes the truth is stranger than fiction. While we may not be fans of the overconfident CEO, we cannot dismiss what we are seeing in the marketplace. While the model 3 is completely dominating its class among mid-size luxury, let us not forget the Model S, which is by far the largest seller in the large luxury car market.

Citron goes on to highlight the fact that the cars that are being traded in for Teslas are mainly Toyota Prius, Honda Accord, and Honda Civic, which means people are actually spending more to be a part of the “Tesla Revolution”. Some brand power. If that wasn’t enough, Citron points out that Tesla seems to be the only car company that can actually produce and sell electric cars.

Tesla is reporting later today, and one interesting thing about that according to Citron Research is the fact that Tesla hasn’t reported Q3 earnings in October since 2016. That time, they beat estimates by 21%. “Does anybody think that Tesla decided to move up its earnings release date because of bad news?”, Citron asks.

A strong quarter removes the overhang of a necessary capital raise – we suspect that Tesla will be generating more than enough cash to both fund aggressive growth plans and build cash on the balance sheet. It transitions Tesla from a “proof of concept” story to a “how much can this grow” story, attracting a whole new growth-oriented investor base.

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